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Special Homeowners Insurance Considerations for Empty Nesters

At this stage of your life, you may be in a downsizing mode. So, you can look for ways to bring your costs down by bringing your insurance in line with your scaled back lifestyle. At the same time, be careful to protect assets you have worked so hard to accumulate. Here are some tips:

  • Let your insurance company know when you retire. Senior discounts may be available, because you will likely be around home more often and can watch over your home/possessions.
  • Consider adding more homeowners liability coverage – and/or an umbrella policy for $1 million. At this stage of your life, you may have more assets to protect in the event you are sued. If you decide on an umbrella policy, note that these policies often cover both home and auto liability, and are separate from your homeowners and auto policies. If you decide to start a home-based business after retiring from your “first career,” consider adding to your homeowners liability coverage.
  • In maintaining your residence, you must realize that you are liable for things that happen on your premises. Keep in mind that in many states you could be held legally responsible for the actions of anyone who drinks in your home and then has an accident in your house or after leaving it. Your policy should protect you against lawsuits due to these types of liability issues.
  • Reassess the current value of your home or condominium and your possessions to see whether you need to increase or decrease your insurance to cover their replacement costs in today’s market.
  • Reassess the value of your expensive possessions, such as jewelry, heirlooms or art – for which you may need a special “floater policy” for extra insurance coverage.
  • If the cost of homeowners insurance and other costs, such as maintaining your home, are becoming too high, consider renting instead of owning. Renter’s insurance is typically less expensive than homeowners, as you are insuring your possessions and not the dwelling itself. Recently, some insurers in Florida and the Gulf states raised homeowners premiums by 20 percent to 30 percent following Hurricanes Katrina and Rita, which hit seniors particularly hard.
  • If you purchase a vacation home or boat, see if you can consolidate your homeowners coverage from the same insurer and possibly qualify for a multiple policy discount.
  • If you’ve just paid off your mortgage – and up until now your homeowners insurance has been paid through your mortgage company – be sure to notify the insurance company to send the premium bills directly to your home address, and remember to pay the premiums on time so that your policy does not lapse, as there is no grace period in a homeowners policy.

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Homeowners Insurance Considerations for All Life Situations

Always shop around and compare the costs of comparable coverage from different insurers to get the best value. Whether you are a homeowner or renter, the appropriate coverage offers important protection.

  • For homeowners, insurance protects your home’s physical structure, as well as your personal property.
  • In contrast, renter's insurance only protects your personal property. Never assume that the landlord’s insurance covers you or your belongings. Landlord’s insurance only protects the building.

Both homeowners and renters may need protection against liability for accidents that injure other people or damage their property.

Let’s be more specific about homeowners insurance and the different types of protection it can provide:

  • Damage to House. Covers damages to the house itself up to the face amount of the policy. For example, if the face amount is $100,000, that’s the most you will receive if your house is totally destroyed, less any deductible.
  • Other Structures. Covers damage to other structures or buildings, such as a detached garage, work shed or fencing.
  • Personal Property. Covers damage to – or loss of – personal property. Personal property includes household contents and other belongings used, owned or worn by you and your family. Be aware that certain personal property items like jewelry, antiques and artwork may need special added coverage.
  • Additional Living Expenses. Covers the necessary living expenses, up to the stated limit, incurred by the insured to continue, as nearly as possible, the normal standard of living when the house cannot be occupied due to a covered loss.
  • Comprehensive Personal Liability. Protects you against claims arising from accidents to others on property that you own or rent. With a few exceptions, such as auto or boating accidents, it is an all-purpose liability coverage that follows you wherever you go.
  • Medical Expenses. Covers medical expenses, but is limited to an amount per person and per accident for injuries occurring on your premises to persons other than an insured. It also may cover medical expenses away from your premises if caused by you, a member of your family or your pets.

You have the option to insure your home and belongings for either replacement cost or actual cash value.

Actual cash value is the amount it would take to repair or replace damage to your home after depreciation.

Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality, without deducting for depreciation. A good rule of thumb is to insure your home for at least 80 percent of its replacement value, recognizing that in most instances, the value of the land doesn’t need to be included.

Be aware that coverage for damage caused by flooding is NOT included in your homeowners policy. If you live in an area prone to flooding from any cause – for example, hurricanes, rivers or streams – be sure to inquire about purchasing flood insurance, which is available through the federal government’s National Flood Insurance Program (NFIP).

Here’s an important tip: It’s a good idea to make an inventory of all of your personal property, along with a photograph or video of each room. Also, save your receipts for major items and keep them in a safe place away from your house or apartment. That will make it easier if you ever need to file a claim.

Your home insurance premiums are affected by a number of factors, for example:

  • Your home’s specific characteristics are important…
    • Its age; older homes typically cost more to insure.
    • Its type of structure; for example, brick, frame, stone or synthetic siding
    • Its wiring
    • Its roof
    • Whether it has a garage
  • Your home’s location also has an impact on your premiums. For example…
    • Its proximity to a fire station
    • Its exposure to extreme weather – hurricanes, tornados or earthquakes
    • Whether it’s in a neighborhood that’s more prone to theft than others
  • Protective devices can also make a difference. For example…
    • Burglar alarm systems
    • Smoke detectors
    • Fire extinguishers
    • Sprinkler systems
    • Dead bolt locks

Having these items throughout your home definitely helps lower your premiums. And, of course, they also greatly help reduce potential damage and injuries.

  • There are some personal characteristics that affect insurance premiums:
  • Non-smokers might pay less for homeowners insurance than smokers.
  • And remember, it’s important to maintain a good credit history because many insurance companies consider credit history when determining how much to charge you for insurance.
  • Your previous claim history has a big impact on your premiums. Consider not putting in claims for smaller amounts/events to avoid being tagged for a premium increase. You may want to consider a higher deductible if you are unlikely to file a claim for a loss that is less than $500 or even $1000.
  • Consolidating homeowners and auto policies with the same insurer can provide a multi-policy discount.

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